Gartner: Data centers, software to lead IT spending growth in 2026

To capitalize on opportunities, partners will need to adapt and localize offerings rather than compete with global players.

Australia’s IT market is at an inflection point, with AI, cybersecurity and cloud expected to drive new IT spending next year, according to Gartner.

“The story for 2025–26 is simple: software and AI are driving the growth, services are being reshaped and hyperscalers are redrawing the map,” Jaideep Thyagarajan, director analyst at Gartner, told CRN.

Overall IT investment is projected to exceed $172 Billion in 2026. Spending on data centres is projected to outpace all other categories, surging almost 23% to $10.1B in 2026, according to the analyst firm.

With global players pouring billions into Australia, infrastructure is fast becoming a commodity, according to Thyagarajan. However, that raises questions for local providers and mid-tier players that can’t out-scale the hyperscalers.

“They can out-serve them through compliance assurance, sector-specific solutions and true customer intimacy,” he said.

Software is projected to become the largest category of IT spending in Australia in 2026, overtaking IT services, rising 13.6% to almost $60B, according to Gartner.

For partner businesses, software spend will open up new opportunities such as delivering AI-enabled SaaS platforms with cybersecurity built in. The key for partners is to customise offerings, not compete head-to-head with the big players.

“The winners won’t just resell global products — they’ll localize, secure and tailor them for Australia’s industries namely, mining, healthcare, government and higher education,” he said.

As GenAI transforms the software landscape, local organizations are rapidly migrating to AI-enabled software and cybersecurity, according to Gartner. For partner organizations, the challenge is to develop the skills and capabilities to support customers adopting these new AI workloads.

“Partners must move beyond coding into data engineering, MLOps, governance and ethical AI frameworks,” said Thyagarajan.

Just as important are the ‘softer’ skills.

“Advisory, change management and industry translation will help Australian clients turn AI hype into business outcomes,” he added.

IT services spending is forecast to increase 5.6% to $58.8B in 2026, slipping behind software as the second-largest category, according to Gartner. Traditional services face margin pressure, but partners can pivot.

“Outcome-based models, automation-enabled delivery and managed AI services will allow services-led partners to grow faster than the headline numbers suggest,” he said.

Spending on devices will climb 6.6% to $16.4B in 2026, as organizations refresh hardware and support hybrid work. Communications services will see the slowest growth, edging up 3.6% to $27.1B in 2026, according to Gartner.

The message is that local organizations are widening their focus from GenAI towards investments in other AI-related technologies. Partners looking to capitalize on the opportunities need to think beyond selling more servers or billing more hours.

“The next wave of growth in Australia will go to those who become trusted AI enablers, SaaS integrators and compliance specialists. That’s the real battleground for 2025–26,” said Thyagarajan.